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1. Adam Smith, the Last of the Former Virtue Ethicists

   • The point has been made in preceding comments that Smith did not seem to discuss the virtues of faith and hope in TMS. As has also been noted, McCloskey’s defense of those two virtues in a secular setting of modern liberal society leaves much to be desired. I argue is that Smith was not a virtue ethicist in the Christian tradition but in the classical tradition.

     Before Christianity, ancient philosophers developed a set of four cardinal virtues: Prudence, Temperance, Justice, and Fortitude. It was only later, particularly by Aquinas and the schoolmen, that the theological virtues of faith, hope, and charity were added to make a set of seven virtues. McCloskey argues that Smith includes charity along with the four cardinal virtues in his system of ethics while leaving out faith and hope. I think a better reading of Smith is that he adopts the four cardinal virtues but treats charity (which he mostly calls benevolence) differently. In this way he is following the ancient tradition of the stoics more closely than the Christian tradition of Aquinas.

     Smith is clearly sympathetic to the ideas of the Stoics, though he argues they take their principles too far (TMS 272-293). We can see evidence of Smith’s stoicism in how he treats poverty and wealth, what he considers to be necessary for happiness, and how men should bear with misfortune or good fortune. In all these cases, it is the life of the mind, the tranquility of the soul, that is most important; not external circumstances. His description of how the beggar by the side of the road has the security that kings are fighting for is an argument for the superiority of philosophy, not material circumstances (see Thomas Martin’s forthcoming essay on Diogenes & Alexander the Great). All that being said, Smith does take exception to the stoic philosophy that men should not care one bit about their external circumstances (TMS 292). But his objection is a minor exception to only the strictest form of stoicism.

     TMS is filled with references to benevolence. Smith believes that benevolence is one of the key attributes of human sympathy as well as a praiseworthy motivation for action. He describes Nature and God as promoting the whole system of mankind for the purpose of universal benevolence. But Smith doesn’t think of benevolence as a virtue like he does fortitude or temperance. He criticizes moral systems that say benevolence is the only important virtue (Hutcheson), and he criticizes systems that suggest benevolence is irrelevant (Mandeville), but in his own system he treats benevolence as a goal, a good end; not a manner of behavior.

     McCloskey is right to argue that Smith was critical of one virtue systems, having a more complex and developed system of virtues himself. But I think she is wrong to focus on Aquinas and the seven virtues, minus two. Instead, a better reading of Smith considers how much he admired the ancients, not only the stoics but Plato and Aristotle too. It is from them that he takes the four cardinal virtues and incorporates them into his own views of why men have sympathy with each other and how they should live so as to be most happy and productive. Benevolence is the over-arching end, just as Plato talked about “the Good” or the stoics talked about the benevolence of God. It is not simply the most convenient of the three theological virtues that Smith adopted for his theory of moral sentiments.

   • 6 comments
   • First comment 22 Sep 2010 by Steve Kunath
   • Last comment 14 Nov 2012 by Todd Peckarsky

2. Economic Enlightenment in Relation to College-going, Ideology, and Other Variables: A Zogby Survey of Americans

   • Nate Silver (pollster and renowned baseball statistician) takes issue with the methodology of this survey, do the authors have a response?

     http://www.fivethirtyeight.com/2010/06/are-you-smarter-than-george-mason.html

   • 5 comments
   • First comment 10 Jun 2010 by N. Joseph Potts
   • Last comment 25 Jan 2011 by John Stephens

3. Mankiw vs. DeLong and Krugman on the CEA’s Real GDP Forecasts in Early 2009: What Might a Time Series Econometrician Have Said?

   • Krugman has responded to this article with:
     I guess I should take it as a compliment that people who want to attack my record feel the need to make stuff up.

   • 5 comments
   • First comment 23 Sep 2012 by Brooks
   • Last comment 24 Sep 2012 by Alex Nash

4. Advanced Placement Economics: The Good, the Bad, and the Ugly

   • I totally concur with this article. I had three kids of mine go through AP economics, both micro and macro. I was appalled – the material was 30 years behind the times, both micro and macro. AP economics is confirming the worst stereotypes of what economics is about. And it was boring, boring, boring, even to me.

   • 4 comments
   • First comment 25 Jan 2011 by Paul Johnson
   • Last comment 16 Mar 2011 by David B

5. The Ideological Profile of Harvard University Press: Categorizing 494 Books Published 2000-2010

   • My two lines about Professor Luft’s book are perfectly accurate and not disputed by him. He does call for compulsory insurance to cover most medical costs. He thinks that this does not justify classifying his book as “left”, because he limits the compulsory coverage to certain conditions and wishes to rely on market mechanisms for other things. I stand by my classification, but this is a difference of opinion, not a failure on my part to get my facts straight.

   • 4 comments
   • First comment 24 Jan 2011 by Hal Luft
   • Last comment 16 Feb 2011 by Milo Schield

6. The Liberty of the Ancients Compared with that of the Moderns

   • Constant’s speech discusses the tradeoffs that are imposed by the modern idea of individual liberty. In most representative governments today, individuals are left to make choices about how involved in the political process they chose to be. If Jack thinks that dedicating his afternoons to discussing policy is more costly than going to his job, he essentially outsources his political power—he votes (or chooses not to vote) and expects that his representative will act with similar interests to his own. The price that is paid for not censoring the public and not requiring full political participation (as was the practice of the liberty of the ancients) means that some people will, by choice, decide that their own private pursuits are more profitable. The profit Jack receives could simply be more time to spend engaging in discourse that is not political, it is not necessarily a monetary profit.

     The problem with trading political power for more individual liberty is that as more power is giving to legislators, they can exert more control over Jack’s individual pursuits, through regulation, taxation and other governmental controls. As an individual, he will find it more difficult to engage society in reforming these actions. A presumption of liberty needs to be maintained in the political sphere and also needs to be protected by legal rights of the individual. Otherwise, direct government involvement in the market process will begin to offset the betterment that Jack was pursuing in the first place by choosing a smaller amount of political power over his individual liberty.

   • 4 comments
   • First comment 15 Apr 2011 by Ariel Nerbovig
   • Last comment 06 May 2011 by Stephanie Myla Helmick

7. Preference Falsification in the Economics Profession

   • While I agree with the overall point that Davis presents in the paper—that of preference falsification existing within the economics profession, I’m really wondering if the division into scholastic and public-discourse sections is nothing more than a division of labor, and as such should not be “changed” by the lay person. Granted, I’m not spending much time reading articles out of the top journals, because I honestly couldn’t understand the math anyway, but it seems likely that those articles get published, hopefully separating at least somewhat the wheat from the chaff, then some professor or researcher with good scholastic and nominal communication skills writes to other professors who have less scholastic and better communication skills, and then the Russ Roberts’ of the world apply the relevant research to public topics. If that flow of information could be possible, then the part that is self-referential, -validating, and -perpetuating is only the original publishing tier, while the professor/communicator levels are more and more responsive to the lay person’s choice (if it really is the lay person that should be choosing what is discussed, but that’s another question). It is probably always going to be true that the best researchers will not be the best communicators, though Davis’ paper seems to imply that the two orientations of the economics profession should be inhabited by the same person. While that sort of super-human-ness certainly is nice, it seems rare that one would be able to skillfully perform both roles, and so a revolution toward such a system would be attended by very few people.

     Now, one could say that a piece of work may become “less relevant” (and I think that is one of the main points here, that the profession/top journals are becoming less relevant) because it becomes less understandable to others, or because it becomes full of information that is not true. My ‘division of labor’ notion is based on the understanding that when Davis says on p. 363 “economic science has not improved its explanatory capacity of the last several years” and reports comments from survey-takers on p. 364 that the profession “fails to explain observable events,” “gain[s] an elegance of sorts but at the expense of relevance,” he is saying something about how more and more, in the top journals, there is high-theory/math-heavy work that is not understandable to the intelligent layperson (or the masters student). “People want to understand the economy, but we are not helping them.” That is; the top journals are not helping them. I think that that is a fine situation. If there is anything to be gained by model-production and heavy statistical analysis, then better mathematicians and scientists can produce those results, and other people can do a better job than they can in transmitting the results.

     If Davis and his respondents are stressing that not only has the top-tier journal become more incomprehensible, but more full of false or inconsequential information, and the preference falsification is supporting this propagation of nonsense, then obviously a view of the profession as division of labor would fall short, as the input stage is being fed by garbage. Davis doesn’t quite make clear whether the “less relevance” of the scholastic tradition is producing true and potentially useful data that is incomprehensible, or false and irrelevant data.

   • 3 comments
   • First comment 21 Apr 2010 by Jon Goldstein
   • Last comment 22 Apr 2010 by Shawn Reed

8. A Life among the Econ, Particularly at UCLA

   • On Bill Allen: One day, when I was an economics graduate student at UCLA, I was waiting for the Bunche Hall elevator. Prof. Allen was waiting as well. I didn’t know him, he had been on leave when I was an undergraduate. Waiting for the elevator, he was friendly and talkative. Afterwards, I asked someone who he was. When they told me he was an economics professor, I was surprised because he had been so friendly and nice!
     I enjoyed listening to the interview, thanks to all involved in putting it together.

   • 3 comments
   • First comment 08 Sep 2010 by morrie goldman
   • Last comment 17 May 2011 by josil

9. Individualism: True and False

   • Much of this introductory chapter to Hayek’s 1948 work deserves ample praise: that rationalist epistemology leads to an ever-encroaching desire to design state-imposed solutions; that individualism recognizes that man in a free state will achieve more than is possible laboring under centralized intelligent design; that true individualism is only selfish in the sense that the individual self directs his own affairs, whatever his egoist or altruist intentions; and that equality is a two-sided coin such that pursuing equality of treatment necessitates inequality of results, and vice versa.

     Unlike some other individualist theorists, his attack on state authority and especially its roots in rationalism is made largely on practical terms. He doesn’t say that statism encroaches on man’s “rights” or on moral principles. Rather, he makes the simple observation that individuals should direct their own affairs because they each are aware of the particulars and the intended objective of those affairs. Society at large and bureaucrats as its representatives simply can not know the ends that men seek in their several endeavors and can not devise all the practical means to achieve them.

     Certainly arguing for a liberal social order from a rights-centered perspective (like that of Locke, Rand, or Nozick) has its own pitfalls. But what if the problem is not with Hayek’s airtight reasoning of matching the actor with his wants, but with his presumption that the correct object of analysis is the individual and not society? If the reader believes that social goals are more aspiring than individual goals, Hayek’s arguments could be used against him: just as it is more practical for individuals to know and direct the pursuits of the individual, it is likewise more practical for society to know and direct the pursuits of society. It is not clear that Hayek has established methodological individualism before arguing for political individualism.

     This should not be a difficult proposition. As societies have become less autocratic and more responsive to democratic impulse, they have also become more tailored towards individualistic ends. Post-war rationalist planners (conservative and liberal) emphasize large welfare states to achieve largely individual goals instead of leviathan state actors to achieve collectivist goals. In other words, history is on the side of the methodological individualist. Yet Hayek did not know this in 1948, and should stress that point more.

     What logically follows from this is that rationalist planners would reduce the ends (and the means) of human pursuits to a least common denominator. As Hayek puts it, “The concentration of all decisions in the hands of authority itself produces a state of affairs in which what structure society still possesses is imposed upon it by government and in which individuals have become interchangeable units with no other definite or durable relations to one another than those determined by the all-comprehensive organization.” (p.27) What is lost is individuality and the localized functions of civil society. Even for those who have communitarian or anti-individualist preconceptions, this is a tragic development.

   • 3 comments
   • First comment 22 Sep 2010 by Tony Quain
   • Last comment 10 May 2013 by Matt

10. "The Two Faces of Adam Smith"

    • Echo’s critique is insightful, and touches on Hanley’s recent appraisal of the article. I would like to suggest that while Vernon Smith’s experiments are very interesting, that his jumping off point misses a better way to reconcile Adam Smith’s two works.

      Although Adam Smith does attribute the propensity to truck, barter, and exchange to man as one of his most innate qualities, it is not the most obvious bridge between the two books. As a method of operation in the world, the propensity is important; as an explanation of the origin of our behavior, less so. The Adam Smith of the Theory of Moral Sentiments proposes a picture of man who receives input from the world around him about how he ought to behave. The man wants to be loved and to be loveable out of a concern for his self-interest. Both works address the content of self-interested behavior. The content which makes up self-interest in each book is explained differently, but they both amount to an exploration of self-interest in different frames. Paganelli (2008) even suggests that self-interest is judged with a more friendly result in the Theory of Moral Sentiments than in The Wealth of Nations.

      Self-interest, rather than the propensity to truck and barter, is perhaps the real tie between the two works. In the Theory of Moral Sentiments Smith addresses humanity in the full context of human interactions, while in the Wealth of Nations he addresses that part of society most affected by the virtue of prudence. The method of approach is therefore different, but the starting point for each is not so far apart as is often assumed.

    • 3 comments
    • First comment 25 Apr 2011 by Echo Keif
    • Last comment 06 May 2011 by Steve Kunath

11. Economic Enlightenment Revisited: New Results Again Find Little Relationship Between Education and Economic Enlightenment but Vitiate Prior Evidence of the Left Being Worse

    • People believing firmly in free market and voluntary exchange efficiency (just missed some fluctuations in Q.16 and negative externalities in Q17) are wrong and “Unenlightened”.
      People believing after USSR economy TOTAL failure and China transition to market economy that voluntary transactions are inefficient and only Gosplan could succeed to organize it are right and enlightened? Are you sure Q16-17 really helpful?
      BTW, conservatives actually able to count negative externalities.
      Q14: say Farmer A hired 5 immigrants from the country w/o tradition to respect property and human life, dignity etc. Let Farmer A saved for a Seazon $100K his costs (taxation, salary) and shared part of $100K among his product consumers. So, public wealth increased $100K. OK, now, close to the end of the Seazon (game almost over, last move of the gamer could be very unpleasant) this immigrant workers grabbed and killed farmer B and raped farmers’ C daughter and escaped to Mexico.
      Public losses counted say $5 million at least. So, conservatives actually count negative externalities, some libertarians so stubbornly ignore (Caplan vs. Friedman):
      http://econlog.econlib.org/archives/2008/06/milton_friedman_10.html

    • 3 comments
    • First comment 17 May 2011 by rihir akidan
    • Last comment 28 Apr 2012 by Moshe

12. The Invisible Hand of Jupiter

    • In The Invisible Hand of Jupiter (1971), Alexander L. Macfie provides an insight on Adam Smiths conception of the relationship between divine guidance, the system of nature and human behavior. The relationship that Smith conceptualizes as the invisible hand appear thrice in his writing. Macfie tries to explain what lead Smith to the reversal of the meaning while noting that, in fact, there is no inconsistency in Smith. The invisible hand of Jupiter is a capricious, energizing force that metaphorically fits the irregularities people have been observing throughout time. The invisible hand of Christian Deity is the order preserving social force that animates orderly development of societies through social individuals.
      While there is no inconsisteny, Macfie is still not satisfied by Smith’s effort to integrate the theological, jurisprudential, ethical and economic arguments. The invisible hand of Jupiter is the innovative force breaking loose of the status quo, whereas the invisible hand of Christian Deity is the conservative force that gravitates towards natural order disturbed by self interested individuals. The invisible hand of Christian Deity appears both in the Theory of Moral Sentiments (1759) and in the Wealth of Nations (1776). Whereas in the Wealth of Nations Smith is concerned with the economic mechanism of the order preserving force that appears in the obvious and simple system of natural liberty which, if perfect, makes itself out in the correspondence of natural and market prices, in the Theory of Moral Sentiments Smith considers the mechanism of distribution of wealth. Smith’s logic is shaky, however, for in the Theory of Moral Sentiments the economic disparity is met by an ethical answer: “In the essentials all the different ranks should be nearly on a level.” While Macfie is aware that Smith distinguishes between benevolence – distributive and esteem justice – and justice – that is commutative justice – and opposes forcing out the levelling of the distribution of essentials, it is not clear whether and how the integration of theological, ethical and economic aspects of Smith’s doctrine bind together and how and whether the invisible hand leads the “rich only [to] select from the heap what is most precious and agreeable […] to make nearly the same distribution […] which would have been made had the earth been divided among equal portions among all its inhabitants (TMS 1759, p. 184).” For Macfie the invisible-hand passage in the Theory of Moral Sentiments remains only an effort, however excellent, to bind the theological ethical and economic arguments into one comprehensive system of thought.

    • 3 comments
    • First comment 15 Oct 2011 by Pavel Kuchař
    • Last comment 15 Nov 2012 by Francis Conlon

13. The Social Science Citation Index: A Black Box—with an Ideological Bias?

    • After a Google keyword search of “Commentary Magazine” and “Social Science Citation Index,” I found this article and was introduced to EJW. The bias Klein and Chiang illuminate, exists not only in the slant of the SSCI journals which make and break careers, but also the themes and questions addressed at major conferences and their panels. (Just take a look at the CfP for next year’s APSA annual.) Now finishing up a PhD and finding the same problem on the job market, the research backgrounds often asked for (my area is IR/ IPE) also come from left field. Rather than become disheartened, this state of affairs increases my resolve to follow and intelligently express my conservative convictions in the face of single minded institutionalized opposition. I love a good fight and know the truth will prevail. I’d rather be right than loved, although it would be nice to be both.

    • 2 comments
    • First comment 01 Nov 2011 by Alex Littlefield
    • Last comment 11 Feb 2013 by Alex Littlefield

14. Adam Smith and Conservative Economics

    • Here Emma Rothschild examines the various schools of interpretation of Adam Smith’s works that emerged shortly after his death. Specifically, she looks at three incidents where Smith’s ideas were used to support a particular policy or school of thought. Starting with the idea that Smith was, at least in a way, an indirect supporter of the French Revolution movement, she then discusses how an early biographer attempted to fundamentally redefine Smith’s understanding of freedom, Her final example shows how certain philosophers and statesmen in England attempted to confirm their own policies and positions by making reference to Smith and saying that his writings were in line with their policies.

      At this point an individual could justifiably ask what all the fuss is about. Does it really matter if Smith would have been a supporter of the French revolution, labor laws, or any other piece of trivia a historian is trying to suggest is important? They might continue and say that Smith opened up the door to modern economics and it is really not important to immerse oneself into the squabbles of the late 18th century. I answer, however, that it does matter and that Rothschild’s piece allows readers today to better understand the state of the world we now find ourselves in. Generally, when Adam Smith’s name is thrown around it is used to talk about the early development of the free market system and economics. If the average individual, and I daresay the average economist, is pressed to provide more details about who Adam Smith was and what his contributions were, they might make vague references to The Wealth of Nations and then completely skip over the career of Smith or even his earlier work on moral sentiments. The general lack of knowledge about Smith’s corpus or about even the general orientation of his work can lead to contradictory interpretations and is in the end what Rothschild’s essay points to.

      Economists, like individuals in many other fields, operate with many assumptions about how individuals operate. The modern turn has brought in primarily utility or Paretian ideas of maximization. While this move is justifiable at least from the perspective of making problems more tractable it fails to make a strong connection to the ideas of the individual that Smith would have assumed. Smith spilled much ink in the Theory of Moral Sentiments on the motivations and dispositions of the individual. Today there are, just like Rothschild’s examples, different schools of thought within the academy on how to correctly interpret Smith and apply his principles to current problems. The fact that these differences exist must be pointed out and once identified a real discussion must take place to understand what Smith is really saying, whether what Smith has said fits with our current knowledge, and only then can we really come to an understand of what liberty is and how it should be enshrined in our civilization. Rothschild’s essay provides a good first step in that direction.

    • 2 comments
    • First comment 07 Oct 2010 by Steve Kunath
    • Last comment 19 Oct 2010 by Brian Bedient

15. Is Economics Independent of Ethics?

    • This article does an exceptional job of arguing against the idea of economics as “separate from and independent of ethics” (3). Jack High rejects the independence doctrine, which separates economics as a positive science from economics as policy advising tool. A key example demonstrates that coercion and voluntary action cannot be defined outside of ethics. Ethics plays a crucial role in guiding economists towards the proper benchmarks.

      I agree with the premise that ethics has a definite place in economics, but I also think it is important that economists carefully define which ethical values they are subscribing to and if those values are in fact appropriate. Ethical values are latent in the most commonplace economic notions, for instance Pareto efficiency and the entirety of welfare economics are loaded with ethical prepositions and implications. The key is to recognize these ethical frameworks rather than try to suppress or obscure them from view.

      My only disappointment with this piece is the way that High ends his brilliant discussion. He says that “accepting the proposition that economic definitions depend on ethical judgments does not involve the economist in taking a stand on moral issues…. “value-freedom of economic science” is left untouched by the central thesis” (15). This back pedaling weakens the strength of his previous arguments and ignores that the use of ethical judgments is itself a commitment to those judgments. Accepting ethics as a part of economics does involve taking an ethical stand. The whole point is that we cannot escape this admission. We cannot be value-free.

    • 2 comments
    • First comment 15 Apr 2011 by Echo Keif
    • Last comment 22 Apr 2011 by John Robinson

16. Adam Smith and the role of the state: education as a public service

    • Skinner points out that people who support a more interventionist government policy would cite Smith for his mention of the government’s involvement in social diversions. It is important to note that Smith says nothing about the state creating institutions or subsidizing in his discussion of pubic diversions. His suggestion that the government should encourage diversions by giving entire liberty to the people means that those people should be free to do what they want, within the confines of their liberty. The state does not encourage exercising liberty by granting subsidies; it encourages exercising liberty by not putting up barriers to its existence.

      The problem with a government body effectively “stepping into” the market in order to correct an efficiency problem is that efficiency is not a static concept. In its application towards education, government policy needs to set up certain standards that will show how close a school, teacher or university is to a given level of efficiency. The level of efficiency is arbitrarily set by experts who will weigh in on where students should be in their educational path, based on gender, age, nationality, family income, and a myriad of other variables. When Smith suggested that the government needed to ensure efficiency, it meant that the government needed to make sure that the opportunity for education was available to each person who desired it, not that the government necessarily had to intervene in the curriculum.

    • 2 comments
    • First comment 22 Apr 2011 by Ariel Nerbovig
    • Last comment 24 Apr 2011 by Brandon Holmes

17. Adam Smith’s Marketplace of Morals

    • Otteson recognizes a common underlying theme uniting Adam Smith’s Theory of Moral Sentiments (TMS) to his later Wealth of Nations (WN). The uniting theme may resolve the so-called “Adam Smith Problem” that a conflict exists between the mutual sympathy presumption of TMS and the self-interest presumption of WN. As Otteson sees it, moral sentiments and economies are both “systems of unintended order that develop according to and conform to the model of a market.” (211) The marketplace metaphor is slightly strained; nevertheless, it effectively reconciles the two works.

      Both WN and TMS describe processes through which spontaneous orders emerge. In WN, the system of “natural liberty” leads self-interested people to narrow their production to a few goods that satisfy a desire in the rest of society. In a division of labor economy, people modify their production and consumption decisions in response to price signals. In TMS, the motivating desire is to share sentiments with others. It leads people to empathize with others and to moderate their own expressions of emotion so that others may empathize with them in return. The interplay of sentiments lead to what Smith calls the “general rules” of propriety. The price system of WN and the system of propriety of TMS are the unintended orders that result from the respective market mechanisms.

      Framed this way, Otteson dissolves the Adam Smith Problem. Self-interest motivates economic actors to respond to price signals. It also motivates social actors to respond to the general rules of propriety. The difference between economic interaction and social interactions is the communication mechanism.

      Otteson’s marketplace construction highlights how market prices and social norms are the unintended orders of social interaction. But it is also a strained metaphor that highlights how social interactions fundamentally differ from economic interactions. Prices are quantitative measures of money, the intermediate good common to all market transactions. General rules however, pertain to the sentiments themselves, the final good in transactions. In social interactions, there are no intermediate goods. If Adam Smith described a marketplace of morals in TMS, it is really a barter society.

      The strain in the TMS marketplace model may explain why social markets are less efficient than economic markets. The impersonal character of intermediate money goods is a major factor in globalization. Cultures, languages, and preferences vary across countries, but everyone understands money. Currency exchange (and protectionist trade policy) is the only hurdle to international market clearing prices. Social markets move much more slowly because there is no analogous intermediate good. As a result, Chinese culture is still very different from American culture; So is Mexican culture; And so is Amish culture, despite being part of America!

      Otteson’s marketplace model also highlights the importance of institutions. WN discusses several institutions common to division of labor economies, including private property, contracts, and money. TMS discusses the Impartial Spectator procedure. It is the procedure of placing ourselves in another person’s shoes, then comparing our own reactions with theirs. Everyone participates in the informal Impartial Spectator institution, though few are conscious of it.

      Whether social interactions are perfect analogs to economic interactions is perhaps not as important as the fact that they share the most compelling features. Neither requires a central authority for nearly all aspects of the market, and both create unplanned orders that evolve with repeated participation. Though not a perfectly efficient one, TMS is a marketplace of morals.

    • 2 comments
    • First comment 13 Oct 2011 by Michael Foley
    • Last comment 14 Nov 2012 by Michael Smith

18. the moral justification of free enterprise

    • One of the first points made by Macfie that I think is noteworthy is that he chose Adam Smith’s Theory of Moral Sentiments because it is, in his view, the most complete and realistic ethical argument for freedom. He points out that although we only deal with the individual aspect, this is appropriate for important reasons. One is that the individual approach ‘puts the spotlight’ on the individual, which is something that economics and ethical studies tend to go around. Questions of human nature are just as important if not more important, in economics as they are in other facets of life; this issue has been lost in economics since the science decided it should not and could not deal with problems of value. He points out that it of course may be replied that this is only due to proper specialization, “[b]ut is there not the risk that the baby is lost between the bath and the water?”

      Macfie reminds us that the problem of human nature is the most important one when it comes to economic behavior. It is, after all, human economic behavior that our science studies. If economists do not deal with it, then who will? Believing that we are only behaving normally (let alone correctly) by doing so and by following this ‘proper specialization’ is incorrect. Critiques of economic behavior from the moral point of view have been made throughout history, and it is abnormal that we dismiss those today as mere issues of value problems while continuing to develop our science without them. I think Macfie has made an important point and it is something that economists should keep in mind when making arguments for freedom. There are many people who want to hear something more than just ‘this way is more efficient’ before they are persuaded by an argument, and there are also people who want to see that the subjects we claim to study are in fact human.

      One of Macfie’s critiques of Smith’s argument says: “Smith is far from his best when he dabbles in theological argument, I think it was just because he was so conscious of the power of self-love, and of actual evil and sin, that he also required this Divine support”. I think Smith was certainly aware of how strong self-love was as a motivator of human behavior, but I also think that Smith saw self-love as productive of good, especially when individuals were freely interacting in the market. It seems to me that whether the natural harmony in human nature observed by Smith was designed by the ‘Author of nature’ (or just ‘Nature’), and whether Smith’s ‘invisible hand’ belongs to an all-wise and benevolent Deity is almost irrelevant to the powerfulness of Smith’s arguments and conclusions. I don’t think Smith intended to give an explanation as to where this natural harmony came from; it seems more likely that he was actually trying to avoid this issue by being vague when it came to mentioning ‘Nature’, ‘the great Architect of the Universe’, or ‘the great Director of Nature’. In fact, I would argue (as Coase does in his article titled “Adam Smith’s View of Man”), it is not clear Adam Smith ascribed this natural harmony in human nature to some Deity. It is likely that he was suspicious of a somewhat different explanation (i.e. natural selection, which was not known to him at the time), and that his attitude about the issue was to defer his opinion about the matter.

      Thus, when Macfie claims “[t]he background of theology seems to me to obscure [Smith’s arguments]”, I would say that it is not so clear that there is a background of theology behind them. What is more, if there was a background of theology, I think it would be irrelevant to the powerfulness and strength of Smith’s arguments and conclusions. The source of the harmony in human nature observed by Smith (which is the basis for his argument) could be life in Mars for all we care, and it still would not change the fact that it is there. It would not change the accuracy of Smith’s description, and it certainly would not change the ethical and economical foundations suggested by Smith as an argument for freedom.

    • 2 comments
    • First comment 14 Oct 2011 by Paola Suarez
    • Last comment 14 Nov 2012 by Alexander Schwengler

19. 'Il est encore plus important de bien faire que de bien dire' A Translation and Analysis of Dupont d

    • I agree with Mr. Byrd’s comment, but I would like to add what I consider to be the true significance of Dupont’s letter.
      Much has been made of Adam Smith’s so-called concessions to State intervention. If you seek to use Smith’s work to advance the liberty principle you are met with resistance from those who declare that Smith was a realist, and that he favored government control of this or that area of economics life, e.g., the postal service, libel laws, differential taxation, etc. Thus you are left without a consistent system to defend against myriad ad hoc violations of the principle.
      It is true that Smith included in his books, especially in The Wealth of Nations, more than a handful of concessions to government. Many liberty-minded readers would like to think these are anomalies, or that Smith had some ulterior motives in including these concessions.
      Dupont’s letter reveals a possible motivation for Smith to include these concessions, even if he would not actually support them. Dupont asks Smith to “forgive the deficiencies of my work that are not unknown to me and some of which were voluntarily committed.” Is it possible that Smith engaged in the same strategic writing? If Dupont was willing to be so candid with Smith regarding his own work, it seems to me very likely that it was an accepted practice of those hoping to bring wide-ranging reform. If Smith was “neither … read nor heard,” he would have no effect on policy or public opinion. If he was “denounced and estranged from the government itself” he risked prolonging “by a decade ignorance and its deadly effects.”
      If this was the generally accepted practice of the reformers of the day then I believe that many of Smith’s concessions can be read as an attempt to avoid “assaulting [the] eyes [of the public] with a bright light,” and “reconstitut[ing] their blindness.”

    • 2 comments
    • First comment 14 Nov 2012 by Bryan Byrd
    • Last comment 14 Nov 2012 by Theodore Phalan

20. From Friedman to Wittman: The Transformation of Chicago and Political Economy

    • Caplan offers a balanced and even favorable description of Wittman’s argument in “Why Democracies Produce Efficient Results” (1989). Wittman objects to most of the public choice literature because it assumes extreme voter stupidity. Instead of assuming voters are ignorant, critics of the government are actually assuming that voters are systematically biased in their beliefs. Wittmann also points out that voters are not as gullible as public choice theorists assume. They use parties like brand labels, which make the voting problem much easier than it might appear. Wittman is also skeptical about complaints of a lack of political competition. He points out that very few unpopular policies persevere because unpopular policies lose votes. Furthermore, incumbents are reelected because they are better than the competition. Wittman finally points out that democracy lowers negotiation and transfer costs.

      Caplan perceptively points out that Wittman’s position is valid, but not sound. While his assumptions lead to his conclusion that democracy is efficient, he commits a fatal flaw by assuming that voters are rational. Caplan’s work in economic beliefs and the systematic bias that exists among non-economists and the less educated weakens the validity of this assumption. Caplan’s theory of rational irrationality, that people are more irrationality when the cost goes down, seems to be the nail in the coffin for Wittman’s theory. Rational public opinion is in fact a public good. Adam Smith had it right when he asserted that perverse policies were the result of systematically biased beliefs.

      The most important message from this article is that empirical testing is necessary for good theory. We cannot assume that voters are rational without testing if that is really the case. Economists must move beyond blackboards and untested behavioral assumptions if we are to make any real progress in our field. Caplan is a brilliant example of this philosophy.

    • 1 comments
    • First comment 11 Mar 2011 by Echo Keif
    • Last comment 11 Mar 2011 by Echo Keif